Medicare Purchases of Brand-name Versus Generic Medications

By August 23, 2018 Commentary

Generic medications are generally cheaper than brand-name ones, if you actually buy them.  The Medicare Part D program apparently still has a fair amount of use of brand-name drugs when a generic is available, according to a study carried by the Journal of the American Medical Association.   (JAMA Article)  The authors focused on combination therapies, where at least one of the component drugs was available as a generic.  Thanks to unusually stupid Congressional interference (almost all Congressional action is at least somewhat stupid), prompted by very large drug company political contributions and lobbying expenditures, Medicare doesn’t use its leverage to negotiate prices and forces the Part D plans to cover all drugs in certain therapeutic classes, thereby precluding plans from using their leverage to get a lower price in exchange for coverage, so in some cases beneficiaries have brand-name drugs prescribed when a generic is available. The researchers looked at the 1500 medications representing the highest Medicare spending and at brand-name fixed-dose combination therapies which had generic or over-the-counter drugs available for the components of the therapy.  For the year 2016 they calculated how much branded drug product was used instead of a generic and what the savings would have been if the generic had been used.

For the 29 included combination therapies, if full generic substitution had occurred in 2016 Medicare would have saved $925 million.  Interestingly, among the brand-name components of these therapies, the average, that is right, the average, increase in price from 2011 to 2016 increased 224%.  You run out of words to describe the behavior of the drug manufacturers.  And Medicare, one of the single largest payers in the country, hamstrings itself from being able to counter this behavior.  For one set of migraine combination therapies alone the cost would go from $232 million to $13 million.  I don’t ever want to hear another politician talk about drug prices until they get serious about actually taking simple steps to fix issues like this.  The savings reported in this study related only to these combination drugs; across all of Part D medications the savings from mandatory generic substitution and forcing formulary competition would be much greater.  And patients would save on premiums and cost-sharing amounts.  Makes your blood boil.

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